A tightening of Defence Force purse strings?

Comment: At some point, the previous government’s big-money promise for defence equipment was going to run into political reality. But courtesy of the Labour-led Government’s arrival, it is happening faster than expected, writes Robert Ayson.

New Finance Minister Grant Robertson is asking all departments to ensure their spending plans are in line with the new government’s priorities. These obviously include initiatives in housing, education, health and child poverty. It’s not clear that military spending is anywhere near the top of the list.

That’s not to say that Defence has escaped Robertson's attention. But in an ominous sign, he has accused National of leaving unfunded its big $20 billion commitment to capital spending for the Defence Force.

This is not an amount National expected to spend itself even if it was re-elected. It was a long-term spending intention which would run from last year’s Defence White Paper until 2030.

That translates into over $1 billion a year on equipment (in addition to personnel and operating costs) over that period. This would be a big jump for New Zealand but it is dwarfed by many overseas comparisons. It would nearly be a rounding error for the Australians.

Even so, spending that amount over such a long period requires cross-party consensus about big equipment decisions which have been looming for many years. These include replacements for the Defence Force’s three most significant platforms, some of which are due to leave service as early as the first half of the 2020s.

Pressures over P8s, frigates

The least politically controversial of these will be the replacements for the Hercules, the veritable (but venerable) workhorse of the Defence Force. Transport aircraft are useful in disaster relief and peacekeeping as well as in transporting soldiers and equipment when they are being sent off for more militarily demanding missions. That means any coalition, left or right of centre, is going to see this project as essential.

This should make it easier sailing for Mark when he presents the revised business case for the Hercules replacements. But on a second big capability, the new Cabinet is likely to face a decision in the first half of 2018 about an actual replacement for the second big capability: the P3 Orion maritime surveillance aircraft. The proposal that Defence has been preparing is to acquire Boeing P8s.

These aircraft would give future governments good options to work very closely with the Australians and the Americans. In fact, as the briefing to incoming Foreign Affairs Minister Winston Peters confirms, an Orion is currently deployed "to the United States Naval Forces Central Command and the Combined Maritime Forces for maritime security surveillance".

The P8 plan also suited National’s desire to expand (rather than simply sustain) New Zealand’s surveillance capacity. And maritime surveillance is not an optional area for New Zealand. No government wants to be unable to keep an eye on the country’s Exclusive Economic Zone, the Southern Ocean, and the zones of our Pacific partners. But some ministers in the new Cabinet may need convincing that this must extend to the underwater surveillance capacities that the Orions are receiving to make them suitable for anti-submarine operations.

And that brings us to the frigates. By comparison to the Hercs and Orions, the two ANZACs are still relatively young. They are being upgraded for service until the late 2020s or early 2030s. Some of that work is already done. But what remains to be completed is going to be an issue for Mr Robertson: Defence’s recently released Briefing to the incoming Minister, New Zealand First’s Ron Mark, indicates that "the Frigate Systems Upgrade project is currently facing significant cost pressure".

Then there are pressures of a different type. Simply because of the passage of time, there are other capability enhancements that any government would need to consider. These include the mid-life upgrade for the Canterbury multi-role vessel. Part of the early spending in National’s $20 billion plan included refurbishing ageing military bases, ensuring that the Defence Force is less vulnerable on overseas operations to cyber hazards, and ensuring the army has the command and control and communications networks it needs for modern operations.

But the later years of the Key-English era of New Zealand politics featured a growing confidence in what the country might be able to acquire. So we’d not just look for a replacement for the much used tanker (the Endeavour): the successor would also be ice-strengthened. The same ability would be included in the new plan to acquire a third offshore patrol vessel. And the littoral support vessel would be of a scale and ability that would make it useful for missions well beyond the South Pacific.

Can kicked down road?

Can good arguments be made for each of these and other changes? In isolation, the answer is most likely to be yes. But in combination each part of the expanding Defence Capability Plan was set to compete for the scarce resources of money and time. And if too much of that early money and time is taken up for capabilities aside from New Zealand’s big three, we know what is likely to happen. Can, kicked, down, road or falling, off, back, truck. Those would become the main possibilities.

Perhaps that won’t be impossibly bad news for some of Mr Mark’s new cabinet colleagues. Few of them would have shared New Zealand First’s lofty campaign ambitions for Defence. Ardern’s government also depends upon the support of the Greens, who have doubts about frigates. And in any case, Labour tends to be uncertain about preparing New Zealand’s Defence Force for maritime missions and coalitions in the wider Asia-Pacific region.

This leaves open the option that the new Government might seize on National’s strategic triangle – the South Pacific, New Zealand, and the Southern Ocean. That combination, which appeared in last year’s White Paper and which I have examined elsewhere, might be commandeered to shape choices away from the expensive maritime combat capabilities which are often of greater use further afield.

If that is the choice, then so be it. That is what governments do. But it could also happen as much by default as by design if the coalition pushes consideration of one of more of the big three replacement choices further into the never-never.

And that leaves Mr Mark with a real conundrum. National kept New Zealand’s options open to replace the big three capabilities and to spend larger amounts in the future to do so. But to keep its future defence options open, New Zealand needs to start spending those larger amounts now. That message is unlikely to be welcomed by the Finance Minister and the Prime Minister. Something will probably have to give.

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